Mobile Retail Must Answer Calls for Change

Phone shops need to evolve to meet changing consumer behaviour

CCS Insight’s third annual survey into UK consumers’ buying patterns for mobile phones and connectivity raises questions about the future role of brick-and-mortar retailing in the telecom industry.

Our research showed accelerating migration to online and digital channels that spans not just the final purchase, but the entire customer journey, from research to after-sales support (see High-Street Phone Shops Set to Transform as Pandemic Accelerates Shift Online).

Of course, Covid-19 has been a trigger of this change, with phone shops only open intermittently over the past 12 months. Until recently, the complexity of taking a mobile phone contract, paired with people’s traditional preference to test the look and feel of a very personal device, has made shops a leading destination in the overall phone-buying process.

This role is now rapidly diminishing. Despite lockdown restrictions, more than 16 million mobile phones were sold in the UK in 2020. Our research indicates that people no longer need to see devices in the flesh first before buying. The pandemic has helped people become more confident of buying phones based on listed features, familiarity with leading brands and recommendations. I find it very hard to see buying behaviour returning to how it was before the pandemic struck.

Covid-19 has also encouraged operators to be more innovative in customer service, which is significant because technical support and billing enquiries are important reasons people visit stores, according to our research. The survey also highlighted that people clearly prefer to interact with mobile operators through digital channels such as websites and apps, rather than traditional methods like speaking over the phone or visiting a store.

The humble phone shop has proved surprisingly resilient amid a widespread retreat from the high street, spanning sectors such as fashion, furniture, tourism, hospitality and banking. It’s ironic that the telecom industry has been an enabler of much of this change but has itself been a laggard to transform.

The original purpose of mobile phone shops, mostly centred on selling devices and connectivity, has long looked dated in a market that moved years ago from gaining customers to retaining them. Phone stores are also an expensive drag for the industry, with high costs for staff and rents, and many of the interactions that take place don’t even translate to a direct sale.

As operators look to cut costs amid a seemingly perpetual struggle to grow revenue, pulling back from the high street may be a temping option. Such a move would be rash, however. Phone shops still have a vital role: they’re an excellent place to showcase products, build rapport with customers, cross-sell and upsell services and troubleshoot technical difficulties.

But it’s time the industry thought about retail differently. I expect to see a greater balance between selling, supporting customers and showcasing new technology. This could lead to fewer, but different types of shop, for example, large out-of-town outlets focussed on experience and engagement, combined with smaller express or convenience stores with specific purposes, such as click-and-collect.

Telecommunication companies sometimes try to mimic web giants like Google and Amazon. Having built their businesses online, those players own relatively little physical retail and rarely interact directly with consumers. When was the last time you picked up the phone to talk to Google, for example?

In the long run, network operators should probably aspire to a similar model, although this is easier said than done. Most have a huge legacy in back-office systems compared with digital-first companies. Replacing and transitioning to a more flexible architecture is a monumental task that forms part of wider transformation strategies already underway.

Also, many people still cherish face-to-face interactions or lack the digital skills to make purchases or ask for support online. BT took a staggering 34.2 million customer care calls in 2020 for example, and 38 million in 2019.

Vodafone group CEO Nick Read recently outlined a digital-first approach to retail that’s complemented by physical stores, rather than the other way around. This feels like a logical approach, at least for now. Successful players in the coming years will be those that best integrate and align bricks-and-mortar retail with online channels, to offer a coherent and complementary experience throughout.

Consumers are clearly steering operators toward online; it’s time for the telecom industry to more fully embrace this change.

This article offers a quick summary of our Insight Report: Pandemic Sparks a Rethink of Operators’ Phone Shop Roots, published in February 2021. Subscribers to our Telecom Operators or Mobile Phones service suites can access the report here and the full survey here. Non-clients please contact us.